Pakistan tops in illegal cigarette sales in Asia, with two out of every five cigarettes sold in Pakistan being illegal and tax evaded.
According to industry statistics, the annual consumption of cigarettes in Pakistan is 70 to 80 billion sticks, of which 40 percent is captured by the tax-evading the illicit sector.
During the last three years, the volume of illicit trade in cigarettes in Pakistan has increased rapidly from 23 percent in 2018 to 34 percent in 2019 and 40 percent by 2020.
The market share of legal cigarettes has decreased by the same proportion. In 2018, the market share of legal cigarettes was 77 percent, which decreased to 66 percent in 2019, and 60 percent in 2020.
“The loss to the national exchequer due to illegal sale of cigarettes in Pakistan is estimated at Rs. 77 billion annually,” said Amna Saleem, spokesperson of Stop Illegal Trade – a media advocacy forum against illicit consumer goods.
She said, “With this huge amount of money, 4 million children can be educated annually or 17 million people suffering from malnutrition due to poverty can meet their food needs three times a month.”
She said that due to the lack of uniform implementation of national laws and government policies, we have witnessed the mushroom growth of the illicit sector in numerous sectors, with tobacco being the leading sector.
She said that this strengthens the non-documented sector, which is not only depriving the Government of revenue but also poses serious social, security, and health challenges.
“Global institutes have already pointed out that the illicit tobacco sale in Pakistan is getting stronger every day. We have to act swift and consistently to ensure the elimination of undocumented sector,” she added.
She said that illegal cigarettes sold in Pakistan include locally manufactured tax evaded cigarettes, smuggled cigarettes, and counterfeits. Further adding, “lack of effective policies and crackdown on elements involved in illicit trade are fueling this trend and Pakistan is rapidly rising in the list of countries involved in illicit cigarette trade.”
Experts have suggested the Government monitor and tax the green leaf threshing process so that no tobacco goes unnoticed and untaxed.
It is pertinent to mention that 98 percent of the estimated Rs. 100 billion in cigarette taxes comes from only two companies, while fifty cigarette companies only contribute 2 percent of taxes.